Morningstar DBRS Confirms KeyCorp's Long-Term Issuer Rating at A (low); Stable Trend

DBRS, Inc. (Morningstar DBRS) confirmed the credit ratings of KeyCorp (KEY or the Company), including the Company's Long-Term Issuer Rating of A (low). At the same time, Morningstar DBRS confirmed the credit ratings of its primary banking subsidiary, KeyBank N.A. (the Bank). The trend for all credit ratings is Stable. The Intrinsic Assessment (IA) for the Bank is "A," while its Support Assessment remains SA1, reflecting the internal support provided by the Company. The Company's Support Assessment is SA3, meaning that timely systemic support is not expected. The Company's Long-Term Issuer Rating is positioned one notch below the Bank's IA.

KEY CREDIT RATING CONSIDERATIONS
The credit ratings and Stable trend reflect KeyCorp's diversified and strong franchise, which includes a retail banking presence in 15 states, a focused national consumer business, and a corporate banking presence targeting specific middle-market industry verticals. Overall, the business mix results in diversified earnings, including a higher than peer level of noninterest income. The credit ratings are also supported by KEY's strong balance sheet, including its ample core deposit funding, liquidity, and solid capitalization that was recently bolstered by Bank of Nova Scotia's (Scotiabank) strategic minority investment. Additionally, despite the current operating environment, Morningstar DBRS' view that the Company's credit fundamentals, earnings, funding, and liquidity levels will remain sound as we expect previous steps to de-risk the loan portfolio will serve KEY well in future economic downturns.

The Bank's Intrinsic Assessment of "A" has been assigned at the high point of the Intrinsic Assessment Range as Morningstar DBRS views that profitability and income before provisions and taxes (IBPT) driven risk metrics will improve in the coming quarters (compared with the net loss that KEY reported in 2024, driven primarily by the Company's securities repositionings during H2 2024).

CREDIT RATING DRIVERS
Over the longer term, KeyCorp's credit ratings would be upgraded if it further strengthened its franchise and achieved a sustained improvement in operating performance while maintaining a similar risk profile. Further deterioration in operating profitability or an outsized increase in credit losses would result in a downgrade of KEY's credit ratings. Additionally, a significant reduction in capital levels would also result in a credit ratings downgrade.

CREDIT RATING RATIONALE
Franchise Combined Building Block Assessment: Strong/Good
Headquartered in Cleveland, Ohio, KEY is a regional bank with total assets of $189 billion (at Q1 2025). The Company provides a wide range of retail and commercial banking, commercial leasing, investment management, consumer finance, student loan refinancing, commercial mortgage servicing/special servicing, and investment banking products/services to individual, corporate, and institutional clients. Morningstar DBRS views KEY's capital markets capabilities as differentiating the Company from many regional bank competitors and providing a strong source of fee income.

Earnings Combined Building Block Assessment: Good/Moderate
KEY's earnings are highly diversified by geography and segment, with a large percentage of revenues derived from noninterest income. While 2024 reported earnings were negatively affected by losses from the sale of securities, the Company fully reinvested the proceeds into higher yielding earnings assets and expects built-in structural tailwinds to enable the Company to deliver on strong net interest income growth in 2025. KEY is currently guiding the Company to achieve significant positive operating leverage in 2025.

Risk Combined Building Block Assessment: Moderate
KEY's asset quality remains sound, reflecting the Company's continued conservative risk tolerance and a granular loan portfolio that is well diversified by geography, products, and industry. While overall credit quality continues to normalize (consistent with industrywide trends), driven by economic pressures and higher-for-longer interest rates, previous steps to reduce exposure to some riskier segments (such as CRE and construction) should help KEY perform relatively well through the credit cycle.

Funding and Liquidity Combined Building Block Assessment: Strong/Good
KEY has ample core deposit funding, which readily funds the loan portfolio and provides substantial capacity to fund future loan growth. Although KEY has been actively reducing its total wholesale borrowing since the 2023 regional banking turmoil, the Company nonetheless continues to have access to various sources of wholesale funding should the need arise. Additionally, KEY maintains strong levels of on-balance sheet liquidity and classifies most securities as Available-For-Sale (AFS) while limiting its allocation to Held-To-Maturity (HTM).

Capitalization Combined Building Block Assessment: Strong/Good
With a reported CET1 ratio of 11.8% (up 150 basis points year over year (YOY)) and a marked CET1 ratio of 9.9% (up 280 bps YOY), KEY's capital levels compare favorably to most peers. Scotiabank's strategic minority investment had the effect of raising KEY's CET1 levels well above its current regulatory minimum (of 7.6%, implying a buffer of 420 bps). Nonetheless, despite the Company's share purchase program (authorized by its board in March 2025), KEY does not expect to do any significant share repurchases until H2 2025 at the earliest.

Further details on the Scorecard Indicators and Building Block Assessments can be found at https://www.dbrsmorningstar.com/research/454789.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental, Social, or Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (June 4, 2024) https://dbrs.morningstar.com/research/433881. In addition Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196 in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The primary sources of information used for these credit ratings include Morningstar Inc. and company documents. Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings was of satisfactory quality.

The credit rating was not initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' trends and credit ratings are under regular surveillance.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com.

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